Phillips pulls out of Louisville

LOUISVILLE — Phillips 66 has told the city of Louisville it will not build a research and training center in the city and is putting its 432-acre property up for sale.

The project, which was announced in 2008, was expected to bring 7,000 jobs and millions of dollars in investment and spending to the area.

Louisville’s elected officials and city staff were informed of Phillips 66’s decision Oct. 16, but the bad news was expected, Mayor Bob Muckle said.

“There’s no denying that I’m personally — and Louisville as a community is — disappointed,” Muckle said. “I don’t think any of us are extremely surprised by the news. We understand where the company’s coming from.”

Louisville announced the news Oct. 17 in a press release after taking a day to inform city council members and process the news, Muckle said.

The short release is a stark contrast to the warm embrace ConocoPhillips received when it announced plans to build a major training and research center at the site in 2008. Leaders in government and the business community hailed the project as a major win for the area, and projected it to be an anchor for the emerging “new energy economy.”

The property was acquired by ConocoPhillips (NYSE: COP), one of the world’s largest oil and gas companies. The company paid $55.6 million for the property, according to Boulder County property records. Phillips 66 inherited the land when ConocoPhillips split into separate extraction and refining companies in 2011.

In the years after the announcement, ConocoPhillips made its commitment to the project clear. The company in 2010 filed preliminary site development plans that envisioned 2.5 million square feet of research and office space at the site. The first 1.6 million square feet were to be completed by 2013, according to plans at the time. ConocoPhillips also demolished the 1.8 million square feet of buildings on the site that previously housed Storage Technology Corp.

But as the worldwide economic slump continued, signs began emerging that ConocoPhillips might back out of the project. After its preliminary plans were approved by Louisville, ConocoPhillips twice asked for extensions before filing its final site plans.

Louisville leaders publicly said they remained optimistic, but by earlier this year they had a growing sense of pessimism. When ConocoPhillips spun off its refining and retail assets to Phillips 66 in 2011, the new company also got the Louisville project.

Phillips 66’s corporate focus did not seem to be aligned with the vision for the research center, which was to develop alternative fuels, Louisville economic development director Aaron DeJong said.

A close look at the new company’s needs and facilities also suggested the Louisville center was not meant to be, Muckle said. Phillips 66 is planning to build a new corporate headquarters campus in Houston, and retained existing research facilities in Bartlesville, Oklahoma. Given those assets, Muckle said, a multimillion-dollar investment in a new campus began looking redundant.

In the past few months, the project’s cancellation seemed like a matter of time, Metro Denver Economic Development Corp. chief executive Tom Clark said.

“We’ve been waiting for the other shoe to drop, and now it has,” Clark said.

Phillips 66 did not issue an announcement about the matter, but spokesman Rich Johnson confirmed it in a short email statement.

“After careful consideration of the needs of the new company and its employees, Phillips 66 has decided to sell its 432-acre property in Louisville, Colo. Phillips 66’s predecessor company, ConocoPhillips, purchased the Louisville property in 2008. As a result of the repositioning of ConocoPhillips into two independent energy companies, the Louisville site became an asset of Phillips 66,” the statement said.

Phillips 66 has not identified a broker to help it sell the property, Muckle said. Louisville will do what it can to promote the property, and the company has given Louisville some cause for optimism.

“They’ve assured us they’ll work hard to find a new user of the property that will be compatible with our community and beneficial for the region,” he said.

Louisville has not formally considered other uses for the site, but Muckle said he would like to see it remain a corporate campus, perhaps with a few companies acquiring large parcels.

Fiscally, the city will be OK because it never included projections of how much money the center would generate into its long-term forecasts or annual budgets, he said.

Being told definitively that Phillips will not come to Louisville “is the second-best option,” between the company actually building the facility and the worse option of continuing the protracted waiting game, Muckle said.

Still, Phillips’ decision will reverberate far beyond Louisville.

“I don’t want to downplay the significance,” he said. “I think it’s a hit to the region.”

Just how much of a hit is to be determined, but it might not be too bad.

“Right now, Boulder, Boulder County and the metro Denver area have a diverse enough economy with the presence of enough companies in key industries that I don’t think we’re going to see a negative ripple effect,” Boulder Economic Council executive director Clif Harald said.

The announcement’s timing also could soften the blow. The metro Denver region has added about 33,000 jobs in the past year, and the economy is recovering. Had ConocoPhillips pulled the plug in the depths of the recession, the effect on local morale might have been different.

“Psychologically, it might have felt a lot more painful,” Clark said.

Louisville already is trying to turn the page.

“We kind of knew it was going to happen, but knowing formally is good so we can move forward and find a new use for the site,” DeJong said. “It makes my job easier. … It’s been tough answering the question” of when the campus would be built.

The property, which overlooks U.S. Highway 36, formerly was the site of Storage Technology Corp. and later Sun Microsystems Inc. It still retains all the positive aspects that attracted ConocoPhillips to it, Louisville officials believe.

“It’s probably the best large development site in the metro area, and it’s ready for development,” Muckle said.

ConocoPhillips’ decision to buy the property in the first place is an endorsement from a major company, Clark said, and that’s a selling point.

It “gives it a certain cachet,” he said, “if someone as good as that company thought it was a great place.”